Recent scandals have led to more scrutiny of mutual-fund companies, and, as David Ward finds, a low-key PR strategy is proving to be the best tack to weather the media storm.A huge percentage of American families have mutual funds, and as a consequence media outlets large and small have been devoting coverage to the subject for much of the past decade. "There are a lot of mutual-fund reporters at newspapers, magazines, and at the wire services," notes Brian Mattes, principal and director of PR for The Vanguard Group. "Some of them are personal-finance journalists who also include mutual funds in their coverage, but there are a lot of dedicated reporters as well." But given the fact that mutual funds are often more of a "set and forget" investment strategy, coverage of the industry has often lacked the urgency or the glamour of day-to-day stock-market journalism. This ended up being a blessing for the industry when the stock market collapsed, since mutual- fund companies and managers were spared much of the wrath of the business press. However, it also meant that many people simply stopped paying attention to mutual funds when the economy went south. Mutual funds are a hot topic again That all changed several months ago when New York State Attorney General Eliot Spitzer began targeting a handful of mutual-fund companies for a variety of alleged sins, all primarily dealing with having one set of rules for the average investor and another for favored clients. Suddenly, the mutual-fund industry found itself a hot media topic once again, though not in the way many in the business would want. "The volume of calls has significantly increased since September when Spitzer filed his complaints," says Jaime Doyle, media relations manager for Washington, DC-based Investment Company Institute. "The situation is still very fluid, it's changing directions, and there are still a lot of unknown factors. All that has fueled a lot of coverage." The good news for the industry is that most of the investigative coverage is being handled by the same group of reporters who've traditionally written about mutual-fund performance. Bill McBride, Edelman Financial EVP, notes that many of these reporters are also actual investors in mutual funds themselves. As such, they bring an added understanding of what these scandals mean to the average investor. "One of the things this industry has is a fairly well-informed, fair-minded press," he notes. "These are some of the best reporters out there in terms of what they know, and they've pushed to really get inside the industry." Several PR pros feel that mutual-fund media coverage had been changing before the recent scandals. "There was probably a 10- or 15-year period where the 'fund manager of the quarter' was lionized on the cover of magazines and in big feature stories in newspapers," says Mattes. "While it helped put mutual funds on many people's radar screens, I don't think it was the right approach - just because a guy has a really good quarter doesn't necessarily mean it's a great fund to buy. Unfortunately, too many readers were confusing the two. Now we've moved away from that and there's a greater recognition of the risks of investing than, say, five or ten years ago." One complaint, however, is that many mutual-fund reporters sense that the current handful of companies linked to recent trading scandals are only the tip of the iceberg, and journalists are eager to break stories implicating others. Mattes said the fact that Vanguard has policies in place to prevent most abuses hasn't prevented some reporters from leaping to conclusions when the company was subpoenaed to turn over information. "A lot of people believe that getting a subpoena is the same as being guilty of something, and that's simply not true," he says. "It's merely a request for information, but some publications are using 'subpoenaed' interchangeably with 'implicated' or 'being probed,' and that's not the case at all." Weathering the media storm McBride says that while over the long haul it's important to use media-outreach programs to build relationships with reporters who cover the industry, there's little mutual-fund companies can do right now except weather the current storm. There is some reason for optimism, however. The media coverage of Spitzer's investigation has, over the short-term, obscured the fact that this is the strongest year for mutual-fund performance since 1999. McBride says that, inevitably, mutual-fund reporters will begin to realize that. "The major mutual-fund companies will have an opportunity to shift the focus to this area and talk about the revival of the market and the performance story," he says. ----- Pitching...mutual funds For the short term, mutual-fund PR should be low key. There's blood in the water. Even efforts to claim that your company is clean will be met by skepticism and may even trigger an attempt to drag every misstep, no matter how small, out for public scrutiny. Pitch the personal-finance angle. With the stock market on the upturn, consumers will once again pay attention to their retirement portfolios and look for advice on safe, yet strong return strategies. Highlight the company and not the individual fund manager. Lionizing a manager in the press only sets you up for a hit if the manager leaves or can't match past performance.